Baldwin Enterprises has two service departments, Personnel and Legal, and two operating divisions, Eastern and Western. Personnel costs are allocated on the basis of employees and Legal costs are allocated on the basis of hours. A summary of Baldwin operations follows: Employees Hours Department direct costs. Personnel 10,800 $430,000 Legal 40 $ 290,000 Eastern 120 5,400 $ 1,330,000 Western 40 1,800 $ 920,000 Required: a. Allocate the cost of the service departments to the operating divisions using the direct method. b. Allocate the cost of the service departments to the operating divisions using the step method. Start with Legal. c. Allocate the cost of the service departments to the operating divisions using the reciprocal method.
Baldwin Enterprises has two service departments, Personnel and Legal, and two operating divisions, Eastern and Western. Personnel costs are allocated on the basis of employees and Legal costs are allocated on the basis of hours. A summary of Baldwin operations follows: Employees Hours Department direct costs. Personnel 10,800 $430,000 Legal 40 $ 290,000 Eastern 120 5,400 $ 1,330,000 Western 40 1,800 $ 920,000 Required: a. Allocate the cost of the service departments to the operating divisions using the direct method. b. Allocate the cost of the service departments to the operating divisions using the step method. Start with Legal. c. Allocate the cost of the service departments to the operating divisions using the reciprocal method.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter5: Support Department And Joint Cost Allocation
Section: Chapter Questions
Problem 1CMA
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